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2 weeks Why is Snowflake so successful? – How did Buffett make $800 million on it in a day! Reddit     

What?Snowflake began trading yesterday under the ticker: SNOW. Shares surged more than 111% on the first day, which makes Snowflake one of the largest tech companies in the world ($70.4 billion). Just this February, the company was “only” worth $11.2 billion.
Why?

  • Amazing CEO: Frank Slootman grew Data Domain from 20 employees into a $1 billion a year revenue firm that employs thousands. Then he grew ServiceNow from $75 million in annual revenue to $1.5 billion within 6 years.
  • Perfect Timing: Covid-19 only accelerated the growth of digital transformation. Snowflake is growing alongside the major public cloud vendors by providing technology that allows clients to quickly analyze and share vast amounts of data and increase capacity as needed, rather than relying on databases that are tied to hardware.
  • Decent Financials: In the first half of 2020, Snowflake grew sales at 130%, widened gross margin to 61.6%, but still lost $171 million.
  • Big Backers: Warren Buffets Berkshire Hathaway, and Marc Benioff Salesforce both have major stakes in the company.

The Takeaway: Snowflake has a lot of things going for it, but that doesn’t necessarily make it a great investment. Remember the company is up 628% since February if you factor in its pre-IPO valuation. Even though Warren Buffett is an investor here is some wisdom from the legendary investor regarding IPOs in general:

“The idea of saying the best place in the world I could put my money is something where all the selling incentives are there, commissions are higher, the animal spirits are rising, that that’s going to perform better than 1,000 other things I could buy where there is no similar enthusiasm. … Just doesn’t make any sense,”

From the MarketBites Investment Newsletter Team made with love 🙂

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